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The company was funded by the German Navy. IvS first constructed two submarines for Spain, which were later sold to Turkey, both of which were launched in 1927 and were closely based on the Type UBIII of the Kaiserliche Marine. In 1927-1933 five IvS submarine designs were built by Crichton-Vulcan in Finland. One of them was CV 707, later Vesikko, which was the prototype of type IIA. The contracts were worded in such a way that IvS personnel were involved with crew training and selection, and were allowed to take part in boat service trials. The Germans — who were, at the time, tightly restricted from using their submarines for themselves — thus gained a first-hand knowledge of how their new prototypes worked in practice.

At the time of IvS, the Germans were bound by the Armistice treaty of 1918. This treaty, among other terms, demanded that all of the German U-boats be destroyed or given to other nations. Thus the German Navy was left without a submarine capacity, and IvS was created to get around these restrictions. IvS ultimately provided the foundations of the navy that Germany used in World War II.

In 1933 Germany established a school for training Unterseeboot crews, ironically under the title 'Anti-Submarine Defence School,' the Unterseebootsabwehrschule. This school was established in Kiel. This program involved provision for a small fleet of eight 500 ton submarines. This number was later doubled to 16.

Later, Germany developed plans for an actual navy. The projected designs for the boats that were to be the composition of this navy were referred to as 'Experimental Motor Boats'. Deutsche Werke in Kiel was elected to build the new submarines, and a new U-boat base was to be built at Kiel-Dietrichsdorf. There component materials were gathered surreptitiously, in preparation for the order to begin production. The program foresaw the following submarine types being built:

1934 – two large, 800 ton boats and two small 250-ton boats.

1935 – four small 250 ton boats

1936 – two large 800 ton boats and six 250 ton boats

1937 – two large 800 ton boats and six 250 ton boats

From there, more boats were constructed, and further on World War II itself began.

The IvS was also involved in designing plans for a Dutch project to build battlecruisers. Battlecruisers were deemed by some to be essential for the defence of the Dutch East Indies against possible Japanese expansion, especially so because the Royal Netherlands Navy lacked any large surface ships. The designs were heavily based on the German Scharnhorst class and the final design was similar to the IvS design, because the Germans were expected to at least furnish the gun turrets for these ships, as constructing them was beyond Dutch capabilities. In the end, political disagreements slowed down the decision making process to April and none of the projected ships were laid down, as on May 10, 1940 the Germans invaded the Netherlands.